Working Paper No.

2012/30
Good Governance as a Concept, and
Why This Matters for Development
Policy
Rachel M. Gisselquist*
March 2012

Abstract

Almost all major development institutions today say that promoting good governance is
an important part of their agendas. Despite this consensus, good governance is an
extremely elusive objective: it means different things to different organizations and to
different actors within these organizations. This study provides a review of donor
approaches and discusses good governance as a concept. While methodological
discussions are often esoteric, the study argues that this one has real world relevance to
development policy because donor agencies regularly measure and assess the quality of
governance, condition assistance on these measurements, seek to design evidence-based
policies, and justify their focus on good governance partly on the basis of claims that
better governance promotes economic development. The weakness of the good
governance concept calls into question each of these projects. Future work would do
well to disaggregate the concept of good governance and refocus attention and analysis
on its various disaggregated components, as defined here (e.g., democracy, the rule of
law, efficient public management).

Keywords: democracy, development policy, foreign aid, good governance, governance

JEL classification: F59, N30, O17, O19

Copyright UNU-WIDER 2012

*UNU-WIDER, Helsinki, email: rachel@wider.unu.edu
This working paper has been prepared within the UNU-WIDER project Foreign Aid: Research and
Communication (ReCom), directed by Tony Addison and Finn Tarp. UNU-WIDER gratefully
acknowledges specific programme contributions from the governments of Denmark (Ministry of Foreign
Affairs, Danida) and Sweden (Swedish International Development Cooperation AgencySida) for the
Research and Communication (ReCom) programme. UNU-WIDER also acknowledges core financial
support to UNU-WIDERs work programme from the governments of Finland (Ministry for Foreign
Affairs), the United Kingdom (Department for International Development), and the governments of
Denmark and Sweden.
ISSN 1798-7237 ISBN 978-92-9230-493-5
 The World Institute for Development Economics Research (WIDER) was
established by the United Nations University (UNU) as its first research and
training centre and started work in Helsinki, Finland in 1985. The Institute
undertakes applied research and policy analysis on structural changes
affecting the developing and transitional economies, provides a forum for the
advocacy of policies leading to robust, equitable and environmentally
sustainable growth, and promotes capacity strengthening and training in the
field of economic and social policy making. Work is carried out by staff
researchers and visiting scholars in Helsinki and through networks of
collaborating scholars and institutions around the world.
www.wider.unu.edu publications@wider.unu.edu

UNU World Institute for Development Economics Research (UNU-WIDER)

Katajanokanlaituri 6 B, 00160 Helsinki, Finland

Typescript prepared by Janis Vehmaan-Kreula at UNU-WIDER

The views expressed in this publication are those of the author(s). Publication does not imply
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any of the views expressed.
 A major problem confronting the contemporary world is how to build effective
governments where they do not exist. (Levi 2006: 5)

1 Introduction

In 1989, the World Bank declared that a crisis of governance underlay the litany of
Africas development problems (World Bank 1989: 60-61). Since then, as Nanda
(2006: 269) notes, good governance has assumed the status of mantra for donor
agencies as well as donor countries. The 2005 Paris Declarations commitment to
national ownership has further focused the attention of donor agencies on good
governance. As Hyden (2008: 267) notes, for instance, by channelling direct budget
support to partner governments the DPs [development partners] are forced to think
about governance as an integral part of their modus operandi.

Proponents of the good governance agenda see it as a worthy goal not only in and of
itself, but also as a means through which to impact a variety of other outcomes,
particularly economic growth and development. In poorly governed countries, it is
argued, corrupt bureaucrats and politicians baldly hinder development efforts by
stealing aid contributions or misdirecting them into unproductive activities. Less
obvious but equally pernicious, governments that are not accountable to their citizens
and with inefficient bureaucracies and weak institutions are unwilling or unable to
formulate and implement pro-growth and pro-poor policies. In a well-cited quote,
former United Nations Secretary-General Kofi Annan noted that, good governance is
perhaps the single most important factor in eradicating poverty and promoting
development (UN 1998). Thus, proponents argue, good governance should be at the
center of development policy: donors should not only provide positive support for
governance reforms in aid-recipient countries, but also should incentivize better
governance by taking into account the quality of governance in decisions about the
distribution of foreign assistance. A large related literature focuses on measures and
assessments of governance quality in particular countries and cross-nationally (see, e.g.
Besanon 2003; Arndt and Oman 2006; Knack 2006; Apaza 2009; Thomas 2010), while
another significant body of work addresses the relationship between governance and
key outcomes such as economic growth (see World Bank 1989; Kaufmann et al. 1999;
Resnick and Birner 2006; Keefer 2009; Holmberg et al. 2009).

Opponents of the good governance agenda, on the other hand, raise strong challenges.
Critics, especially in aid-recipient countries, argue that the use of governance criteria in
the allocation of foreign aid effectively introduces political conditionalities and imposes
Western liberal models of democracy (see Nanda 2006; NEPAD 2007: 3-4). Grindle
(2004) points out that the good governance agenda is a poor guide for policy because it
is ad hoc, unrealistically long, and not attuned to issues of sequencing and historical
development (see also Booth 2011). Along related lines, Andrews (2008: 380) notes that
prevailing models of government effectiveness are like telling developing countries
that the way to develop is to become developed and that the one-way-best model of
governance ignores institutional variation across well-governed states (see Pritchett and
Woolcock 2004). An active body of research also raises questions about the causal
effect of the quality of governance on various outcomes, especially economic growth
(see, e.g. Kurtz and Schrank 2007a, 2007b; Khan 2009).

1
Yet, despite the importance of the good governance debate to international development
policy, there remains considerable confusion over a basic question: what is governance,
and especially good governance? Indeed, few discussions of governance fail to note this
definitional ambiguity (see, e.g. Weiss 2000; Doornbos 2001; Andrews 2008; Keefer
2009; Williams 2009; Grindle 2010). Most studies simply proceed by selecting one
definition among the many: in one of the more straightforward discussions of this,
Keefer (2009: 439) notes that there is no agreed definition of governance and thus
that for various, sometimes necessarily arbitrary reasons, his review focuses on the
literature that links economic development with secure property rights, voice and
accountability, and the performance of the bureaucracy.

This study has two related parts. The first addresses what Keefer (2009) and other
reviews of the literature have skipped: rather than arbitrarily selecting one definition,
it provides a systematic review and comparison of working definitions of good
governance from donor institutions, the key voices in the good governance debate
(Santiso 2001: 4-6; Nanda 2006; Hout 2007). The review identifies seven core
components highlighted in working definitions of good governance and discusses how
these definitions in use vary in terms of emphasis of these components, both across, and
within, donor organizations. These components are: democracy and representation,
human rights, the rule of law, efficient and effective public management, transparency
and accountability, developmentalist objectives, and a varying range of specific
economic and political policies, programmes, and institutions.

The second part of the study builds on the first to make two related arguments. First,
good governance as defined by donors is a poorly specified concept. This may sound
like a purely academic critique, but is in fact directly relevant to development policy.
The importance of concepts for measurement and theory-building is a core point in
work on social science research methods (see Sartori 1984; Gerring 2001; Goertz 2005;
Collier and Gerring 2009; Shively 2010). In policy terms, the fact that good governance
is such a poorly specified concept affects, for one, the ability of development agencies
to defensibly measure and assess the quality of governance, one of the bases upon
which aid may be conditioned. It affects also their ability to design and justify evidence-
based policy, i.e., policy built upon precise and empirically-tested hypotheses about
how political and economic institutions change, and about how this in turn affects
economic development.

Second, this study argues that, given the weaknesses of this concept, future research and
analysis by development analysts should focus more on the seven disaggregated
components of good governance identified here, rather than on the ad hoc macro
concept (see also Keefer 2009). The term good governance has become a catchy
shorthand way to describe a variety of institutions and is thus likely to remain in
common public usage, but it is not a useful concept for development analysts.
Disaggregation of the concept will allow for more precision in the formulation and
testing of hypotheses, building on large related literatures from political science in
particular.

This study begins with a discussion of governance and, building on that, an overview of
working definitions of good governance from donor institutions. Next, it evaluates good
governance as a theoretical concept. A final section discusses how the weaknesses of

2
the governance concept pose problems for one of the most central claims in the policy
literature, that good governance promotes economic development.

2 Governance

In common usage, governanceas distinct from good governanceis often equated

with government or the act or process of governing.1 International organizations and
scholars have adopted more extensive definitions of the term. As Keefer (2009: 439)
notes, there is no agreed definition of governance that would provide a convenient
device for organizing the literature. Weiss (2000), for one, lists seven different
definitions from as many organizations.2 The OECD (2009), as discussed further below,
compiles another seventeen definitions.

According to the definitions listed in these sources, for instance, the UNDP (1997: 2-3)
defines governance as the exercise of economic, political and administrative authority
to manage a countrys affairs at all levels, which comprises mechanisms, processes
and institutions through which citizens and groups articulate their interests, exercise
their legal rights, meet their obligations and mediate their differences. For the IMF, it is
the process by which public institutions conduct public affairs and manage public
resources (UNDP 2007: 128). For the OECD, it is the use of political authority and
exercise of control in a society in relation to the management of its resources for social
and economic development, which encompasses the role of public authorities in
establishing the environment in which economic operators function and in determining
the distribution of benefits as well as the nature of the relationship between the ruler and
the ruled (OECD 1995: 14).

Not only do definitions vary across organizations, they also vary within organizations.
Some of those used by the World Bank include:

the exercise of political power to manage a nations affairs (World Bank 1989:
61);
the manner in which power is exercised in the management of a countrys
economic and social resources, with three distinct aspects : (i) the form of
political regime; (ii) the process by which authority is exercised in the
management of a countrys economic and social resources for development; and
(iii) the capacity of governments to design, formulate, and implement policies
and discharge functions (World Bank 1994: xiv);
the manner in which public officials and institutions acquire and exercise the
authority to shape public policy and provide public goods and services (World
Bank 2007a);
the rule of the rulers, typically within a given set of rules (World Bank 2010);
and

1 From Merriam-Webster Online, http://www.merriam-webster.com/.

2 He also lists a definition of good governance from UN Secretary-General Kofi Annan.

3
 traditions and institutions by which authority in a country is exercised
(Kaufmann et al. 2009: 5). This definition is operationalized in the World
Banks widely-used Worldwide Governance Indicators (WGI) project in terms
of six aggregate indicators: (1) voice and accountability (the extent to which a
countrys citizens are able to participate in selecting their government, as well as
freedom of expression, freedom of association, and free media); (2) political
stability and the absence of violence; (3) government effectiveness; (4)
regulatory quality; (5) the rule of law; and (6) control of corruption (World Bank
2007b: 2).

Despite differences in language, most of these definitions include three common

elements that point toward a minimal understanding of governance as (1) the process (or
manner) through which (2) power (or authority) is exercised (3) to manage the
collective affairs of a community (or a country, society, or nation). With a few
exceptions, all of these elements are arguably clear even in the most succinct
formulations.3 In the World Bank (2010) definition, for instance, governance is rule
(i.e., the act or manner of exercising authority), carried out by rulers (i.e., those with
power/authority), within a given set of rules (i.e., a common society).

This minimal definition of governance suggests description, leaving open multiple

possibilities of how, and towards what ends, power might be exercised within the
community. For instance, it might be according to popular vote, by consensus,
according to a set of universally applied laws, through the dictates of a supreme leader,
or through physical force. Key actors might include government agencies, elected
officials, hereditary rulers, religious leaders, judicial authorities, or the voting public.
The collective affairs of a community might include anything from national security to
natural resources, from monetary policy to cultural affairs, from infrastructure
development to educational standards.

Many definitions of governance also implicitly or explicitly include additional elements,

in particular some conception of (4) the core objectives met by effective governance; (5)
the principles, values, or norms that should be upheld in the process of governing; and
(6) the specific institutions that well-governed countries should have. Definitions from
OECD (1995) and World Bank (1994), for instance, both highlight development as a
core objective: a countrys affairs and resources are managed, according to the OECD,
for social and economic development. UNDP (1997) is suggestive of a sort of pluralist
democracy, with channels for the representation of individual (citizen) and group
interests. The World Banks WGI highlights six broad principles or standards that well-
governed countries should meet and touches on specific institutions such as a free
media.

These more extensive aspects of definitions of governance suggest various criteria and
standards against which the quality of governance can be assessed. (In these examples:
does the manner of governing promote development? Is it representative and
participatory? etc.) These criteria are addressed more fully in the next section of this
study.

3 USAIDs definition is one exception: governance issues pertain to the ability of government to
develop an efficient, effective, and accountable public management process that is open to citizen
participation and that strengthens rather than weakens a democratic system of government (USAID
n.d., as cited in OECD 2009: 23).

4
Finally, as the UNDP (2000) notes: Governance, including its social, political and
economic dimensions, operates at every level of human enterprise, be it the household,
village, municipality, nation, region or globe (UNDP 2000, as cited in OECD 2009:
24). Thus, the term is widely used in relation to a variety of specific contexts and
approaches: e.g., corporate governance, participatory governance, global governance,
information technology (IT) governance, environmental governance, local governance,
NGO governance, and sustainable governance. Governance as addressed in the policy
literature reviewed here refers primarily to governance in domestic politics and is
distinct from these other uses. In general, this means a focus on governance at the
national level, although governance at various sub-national or local levels is also central
to some work.

Other uses of the term governance focus either on a different context (e.g., corporations,
the international arena, NGOs) or highlight a particular manner of governing (e.g.,
participatory, sustainable). Thus, they are distinctalthough sometimes relevantto
governance as addressed here. For instance, discussion of the governance policies,
programmes, and projects of the United Nations, the World Bank, and other donors may
relate to issues of global governance, or systems of rule in the international arena (see
Biersteker 2010); the African Peer Review Mechanisms assessment of governance
addresses corporate governance as one of its four focus areas; and in addressing how
governance is carried out at the national and sub-national levels, many studies argue for
the importance of deliberation and participatory governance (see Osmani 2007).

3 Good governance: working definitions and components

What then is good governance? Working definitions of good governance and the quality
of governance more generally, are notable in their diversity. Table 1 gives examples
from the major multilateral agencies, including the UN, the multilateral development
banks, the European Commission, the IMF, and the OECD. These definitions are drawn
either from each organizations current policy on (good) governance (e.g., the IMFs
Good Governance: The IMFs Role, published in 1997) or its most recent major public
statement on the topic (e.g., the entry entitled Governance on the UNs website). With
the exceptions of the European Bank for Reconstruction and Development (EBRD) and
the Inter-American Development Bank (IADB), all of these organizations use the term
good governance widely and discuss its promotion among their main objectives. Both
the EBRD and the IADB highlight a number of issues associated with good governance
(democracy, the rule of law, human rights, institutional development), but neither
frames its work in these terms. As the definitions presented in Table 1 suggest, there are
clear similarities across working definitions, but there are also major differences.

5
Table 1: Working definitions of good governance from selected multilaterals

United Nations
United Nations In the community of nations, governance is considered good and democratic to
the degree in which a countrys institutions and processes are transparent. Its
institutions refer to such bodies as parliament and its various ministries. Its processes
include such key activities as elections and legal procedures, which must be seen to
be free of corruption and accountable to the people. A countrys success in achieving
this standard has become a key measure of its credibility and respect in the world.

Good governance promotes equity, participation, pluralism, transparency,

accountability and the rule of law, in a manner that is effective, efficient and enduring.
In translating these principles into practice, we see the holding of free, fair and
frequent elections, representative legislatures that make laws and provides oversight,
and an independent judiciary to interpret those laws.

The greatest threats to good governance come from corruption, violence and poverty,
all of which undermine transparency, security, participation and fundamental
freedoms.

Source: UN website, Governance

United Nations Good governance refers to governing systems which are capable, responsive,
Development inclusive, and transparent. All countries, developed and developing, need to work
Programme continuously towards better governance.
(UNDP)
Good, or democratic governance as we call it at UNDP, entails meaningful and
inclusive political participation. Improving governance should include more people
having more of a say in the decisions which shape their lives.

Source: Remarks by Helen Clark, Administrator of the United Nations Development

Programme, at the Fourth United Nations Conference on the Least Developed
Countries High Level Interactive Thematic Debate on Good Governance at All Levels,
Istanbul, 11 May 2011
Multilateral Development Banks
World Bank In the last half-century we have developed a better understanding of what helps
governments function effectively and achieve economic progress. In the development
community, we have a phrase for it. We call it good governance. It is essentially the
combination of transparent and accountable institutions, strong skills and
competence, and a fundamental willingness to do the right thing. Those are the things
that enable a government to deliver services to its people efficiently.Paul
Wolfowitz, World Bank President, Jakarta, 11 April 2006

Source: World Bank, Strengthening the World Bank Group Engagement on

Governance and Anticorruption, 21 March 2007, p. 1
African Good governance is defined in several ways. According to the 2000 Bank Group
Development Policy on Good Governance, governance is a process referring to the manner in
Bank which power is exercised in the management of the affairs of a nation, and its
relations with other nations. p. 2. The policy identifies the key elements of good
governance as: accountability, transparency, participation, combating corruption, and
the promotion of an enabling legal and judicial framework.

Source: AfDB, Governance Strategic Directions and Action Plan Gap 2008-2012
(2008), fn. 1, p. 15
Asian Among the many definitions of governance that exist, the one that appears the most
Development appropriate from the viewpoint of the Bank is the manner in which power is exercised
Bank (ADB) in the management of a countrys economic and social resources for
development.4 Although policy aspects are important for development, the Banks
concept of good governance focuses essentially on the ingredients for effective

4 Websters New Universal Unabridged Dictionary (London: Dorset & Baber 1979).

6
 management. In other words, irrespective of the precise set of economic policies that
find favour with a government, good governance is required to ensure that those
policies have their desired effect. In essence, it concerns norms of behaviour that
help ensure that governments actually deliver to their citizens what they say they will
deliver. [I]n formulating an analytical framework for addressing governance issues,
the Bank prefers to draw a distinction between, on the one hand, elements of good
governance and, on the other, the specific areas of action (e.g., public sector
management) in which they could be promoted or their existence enhanced. In line
with this reasoning, and building upon the approach of the World Bank, the Bank has
identified four basic elements of good governance: (i) accountability, (ii) participation,
(iii) predictability, and (iv) transparency.

Source: ADB, Governance: Sound Economic Management (August 1995), pp. 3, 4, 8

European Bank The term good governance is not in wide use in EBRD documents. Chapter 10 of the
for 2010 Annual Report deals with Governance and Accountability, which refers to good
Reconstruction corporate governance in EBRDs activities (i.e., All operations, programmes,
and Development strategies and policies are scrutinized by independent evaluation, which ensures
(EBRD) accountability and allows lessons to be learned.) Founding documents of the EBRD
highlight several issues commonly associated with good governance (multiparty
democracy, the rule of law, respect for human rights, and market economics), but do
not use the term.

Source: EBRD, Annual Report 2010: Securing the Recovery (2010), p. 64

Inter-American The term good governance is not in wide use in IADB documents, although
Development documents highlight several issues commonly associated with good governance
Bank (IADB) (accountability, transparency, democracy, institutional development). It is not
highlighted explicitly, for instance, among the five institutional priorities approved by
the Board of Governors in 2010 to sharpen [its] effectiveness as a development
partner in the region: (1) Social Policy for Equity and Productivity, (2) Infrastructure for
Competitiveness and Social Welfare, (3) Institutions for Growth and Social Welfare,
(4) Competitive Regional and Global International Integration, and (5) Protecting the
Environment, Respond to Climate Change, Promote Renewable Energy, and
Ensuring Food Security.

Source: IADB, Development Effectiveness Overview 2010 (2010), p. xxv

Other Multilaterals
European Governance means rules, processes and behaviour that affect the way in which
Commission powers are exercised at European level, particularly as regards openness,
participation, accountability, effectiveness and coherence. Five principles underpin
good governance and the changes proposed in this White Paper: openness,
participation, accountability, effectiveness and coherence. Each principle is important
for establishing more democratic governance. They underpin democracy and the rule
of law in the Member States, but they apply to all levels of governmentglobal,
European, national, regional and local.

Source: EC, European Governance: A White Paper, Brussels, 25 July 2001, fn. 1 on
p. 8, p. 10 (sic)
International Good governance is important for countries at all stages of development. Our
Monetary Fund approach is to concentrate on those aspects of good governance that are most
(IMF) closely related to our surveillance over macroeconomic policiesnamely, the
transparency of government accounts, the effectiveness of public resource
management, and the stability and transparency of the economic and regulatory
environment for private sector activity. (Michel Camdessus, IMF Managing Director,
Address to the United Nations Economic and Social Council, 2 July 1997)

The IMF is primarily concerned with macroeconomic stability, external viability, and
orderly economic growth in member countries. The contribution that the IMF can
make to good governance (including the avoidance of corrupt practices) through its
policy advice and, where relevant, technical assistance, arises principally in two
spheres:

improving the management of public resources through reforms covering public

sector institutions (e.g., the treasury, central bank, public enterprises, civil service,

7
 and the official statistics function), including administrative procedures (e.g.,
expenditure control, budget management, and revenue collection); and

supporting the development and maintenance of a transparent and stable

economic and regulatory environment conducive to efficient private sector
activities (e.g., price systems, exchange and trade regimes, and banking systems
and their related regulations).

Source: IMF, Good Governance: The IMFs Role (August 1997), p. iv, 3
Organization for In its work on public governance, the OECD focuses in particular on the principal
Economic elements of good governance, namely:
Cooperation and
Development Accountability: government is able and willing to show the extent to which its actions
(OECD) and decisions are consistent with clearly-defined and agreed-upon objectives.

Transparency: government actions, decisions and decision-making processes are

open to an appropriate level of scrutiny by others parts of government, civil society
and, in some instances, outside institutions and governments.

Efficiency and effectiveness: government strives to produce quality public outputs,

including services delivered to citizens, at the best cost, and ensures that outputs
meet the original intentions of policymakers.

Responsiveness: government has the capacity and flexibility to respond rapidly to

societal changes, takes into account the expectations of civil society in identifying the
general public interest, and is willing to critically re-examine the role of government.

Forward vision: government is able to anticipate future problems and issues based
on current data and trends and develop policies that take into account future costs
and anticipated changes (e.g. demographic, economic, environmental, etc.).

Rule of law: government enforces equally transparent laws, regulations and codes

Source: OECD, Directorate for Public Governance and Territorial Development,

Principal Elements of Good Governance.

Source: Authors compilation.

As Table 2 (at the end of this study) catalogues, at least seven core components are
collectively highlighted in these working definitions: (1) democracy and representation,
(2) human rights, (3) the rule of law, (4) effective and efficient public management, (5)
transparency and accountability, (6) developmentalist objectives, and (7) a varying
range of particular political and economic policies, programmes, and institutions (e.g.,
elections, a legislature, a free press, secure property rights). Different definitions from
Table 1 highlight different components. Table 2 quotes the specific terms used in each
definition. UN (n.d.), for instance, addresses six of the seven components, but does not
explicitly link good governance with development. (However, other UN documents do
explicitly make this link, as discussed further below.) It also references equity and
security as additional components. World Bank (2007a), by contrast, highlights efficient
and effective public management, transparency and accountability, and the objective of
development, steering clear of more political components. It also includes discussion
of technical capacity, leadership, and the delivery of public services. The IMF (1997)
does not present a global definition but explicitly frames its discussion in terms of
components of governance that are related to its mandate of dealing with
macroeconomic stability.

8
These same seven components also figure in other definitions in use by donor agencies.
The OECDs 2009 Sourcebook, Donor Approaches to Governance Assessments,
provides a useful listing of definitions used by aid agencies from 12 OECD member
countries and five multilaterals (ADB, EC, IMF, UNDP, and World Bank). Table 3 (at
the end of this study) summarizes the components highlighted by each of these
definitions. A careful reader might note that this listing explicitly compiles definitions
of governance (rather than good governance). In fact, underscoring the lack of
precision inherent in working uses of these terms, the listing refers to both
interchangeably and most of the definitions of governance reference criteria for
assessing governance quality. Further underscoring definitional ambiguities, none of the
multilaterals definitions included in OECD (2009) are the same as those compiled in
Table 1, and classifications for each thus differ between Table 2 and Table 3: Clearly,
multiple working definitions are in use within all of these organizations.

As Table 3 shows, the definitions given in OECD (2009) highlight in particular the rule
of law, and democracy and representation. Six tie governance specifically to
developmentalist objectives (Austria, Denmark, Ireland, the Netherlands, the UK, and
the ADB), while the same number highlight human rights, and efficient and effective
public management. Sweden elaborates particular central democratic institutions, while
the ADB discusses financial and regulatory institutions. A handful of additional
components are also mentioned by several donors, including equity, sustainability,
legitimacy, social welfare, the States ability to serve the citizens, and public service
provision.

As Tables 2 and 3 illustrate, there is a clear distinction between the more economic and
management focused approaches in use by the multilateral development banks and the
greater attention to political issues in the approaches of the UN, the European
Commission, and many bilateral donors. This distinction is clearly rooted in the history
of the concept and organizational mandates. As has been well-summarized by other
scholars, the origins of the good governance agenda can be seen clearly in work by
multilateral institutions, and especially the World Bank, in the late 1980s and early
1990s (Doornbos 2001; Nanda 2006; Williams 2009: 607-608; Grindle 2010: 5-8). One
of the first major statements on the issue was the World Banks 1989 study, Sub-
Saharan Africa: From Crisis to Sustainable Growth, which, as noted above, attributed
the litany of Africas development problems in the 1970s and 1980s to a crisis of
governance, arguing for the need to look beyond the external factors emphasized in
other work to internal or domestic factors (60, 23). The study highlighted a number of
pathways through which the quality of governance affected development in the region.
These included the use of public resources for badly designed public investment
projects, the introduction of price distortions, creation of institutional environments that
discouraged productive private-sector activities (e.g., through costly regulations),
spending on overblown public agencies, and the waste and theft of aid resources by
unaccountable public officials (62).5 These issues have been reflected clearly in
subsequent Bank policy on governance, which is inextricably bound up with
developmental objectives, and includes both efforts to institute effective, efficient,
transparent, and non-corrupt public management, and the adoption of free market
policies, programmes, and other institutions seen to promote economic growth, such as

5 In particular, see Chapter 2, Sustainable Growth with Equity, 37-62.

9
secure property rights and a business-friendly regulatory environment. As the UNECA
(2003) summarizes well:

To the World Bank, good governance consists of a public service that is

efficient, a judicial system that is reliable, and an administration that is
accountable to the public. The World Bank elaborates on four elements
of good governance (World Bank 1989, 1992):

o Public sector management emphasizing the need for effective

financial and human resource management through improved
budgeting, accounting and reporting, and rooting out inefficiency
particularly in public enterprises;

o Accountability in public services, including effective accounting,

auditing and decentralization, and generally making public officials
responsible for their actions and responsive to consumers;

o A predictable legal framework with rules known in advance; a

reliable and independent judiciary and law enforcement mechanisms;
and

o Availability of information and transparency in order to enhance

policy analysis, promote public debate and reduce the risk of
corruption. (5)

This approach to good governance has roots in two strains of the literature: (1) work in
the 1970s-1990s that challenged the role of the state in development, spurred on
particularly by the experience of market transition in the former Soviet Union and (2)
the new institutionalism in economics and in particular Douglass Norths Institutions,
Institutional Change and Economic Performance, published in 1990 (Grindle 2010: 3-
5). The Banks institutional mandate also played an important role: because the Bank is
prohibited under its Articles of Agreement from engaging in political affairs, focus on
governance by the Bank could only be justified insofar as governance directly affected
economic development, i.e. only insofar as governance was relevant to the Banks
mandate (see Oestreich 2004; Harrison 2005; Moloney 2009). Nor has the Bank been
free to engage fully in political analysis or consideration of human rights in its
activities, both of which could be seen as political activities favouring one form of
government or one domestic faction over another (see Shihata 1988; World Bank 1998;
Palacio 2006). Thus, governance for the Bank, while addressing various issues dealing
with public policy, representation, and public administration, has taken on a curiously
apolitical character.

Since the early 1990s, however, use of the concept by other organizations has expanded
to include a variety of other good things, including political liberalization and human
rights (see Grindle 2010: 6-9). Unbound by the same constraints placed on the Bank, the
UN, in particular, has used the terms good and democratic governance
interchangeably. Core principles of representative democracy, such as participation,
equality, and inclusivity are intimately bound up with the UNs approach. The United
Nations Social Commission for Asia and the Pacific (n.d.), for instance, notes that:

10
 Good governance has 8 major characteristics. It is participatory,
consensus oriented, accountable, transparent, responsive, effective and
efficient, equitable and inclusive and follows the rule of law. It assures
that corruption is minimized, the views of minorities are taken into
account and that the voices of the most vulnerable in society are heard in
decision-making. It is also responsive to the present and future needs of
society. (1)

UN projects specify and work to support key democratic political institutions as part of
these efforts. The UNs Human Development Report 2002: Deepening Democracy in a
Fragmented World summarizes these institutions as follows:

A system of representation, with well-functioning political parties

and interest associations.

An electoral system that guarantees free and fair elections as well as

universal suffrage.

A system of checks and balances based on the separation of powers,

with independent judicial and legislative branches.

A vibrant civil society, able to monitor government and private

businessand provide alternative forms of political participation.

A free, independent media.

Effective civilian control over the military and other security forces.
(4)

The UN also explicitly underscores the relevance of democratic principles in the design
and management of its own governance projects and programmes: the Global
Programme on Democratic Governance Assessments, supported by UNDPs Oslo
Governance Centre, for instance, highlights its focus on nationally owned, rather than
external, governance assessment, and provides financial and technical support to sixteen
projects (Governance Assessment Portal, n.d.) Such assessments are seen as an
accountability mechanism for local stakeholders, and also intended to be participatory,
transparent, and legitimate by including a broad and representative range of national
actors, providing these actors with full information on the process, and making the
results of assessments open to the public (UNDP 2009: 10-11).

While the definition of good governance in use by some multilateral agencies has
expanded, the link with development has remained central. The political components of
governance are not just seen as good things in their own right, but also because they
promote development broadly defined. One of the clearest statements on this was made
in the 2002 Human Development Report:

It has become common in recent years to hear policy-makers and

development experts describe good governance as the missing link to
successful growth and economic reform in developing countries. But
attention has focused almost exclusively on economic processes and

11
 administrative efficiency. The central message of this Report is that
effective governance is central to human development, and lasting
solutions need to go beyond such narrow issues and be firmly grounded
in democratic politics in the broadest sense. In other words, not
democracy as practiced by any particular country or group of
countriesbut rather a set of principles and core values that allow poor
people to gain power through participation while protecting them from
arbitrary, unaccountable actions in their lives by governments,
multinational corporations and other forces. (Malloch Brown 2002: vi)

The report further spelled out a three part argument for the ways in which democratic
governance promotes human development:

First, enjoying political freedom and participating in the decisions that

shape ones life are fundamental human rights: they are part of human
development in their own right.

Second, democracy helps protect people from economic and political

catastrophes such as famines and descents into chaos. Nobel Prize-
winner Amartya Sen has shown how elections and a free press give
politicians in democracies much stronger incentives to avert famines.
Democracies also contribute to political stability, providing open space
for political opposition and handovers of power.

Third, democratic governance can trigger a virtuous cycle of

developmentas political freedom empowers people to press for
policies that expand social and economic opportunities, and as open
debates help communities shape their priorities. (UNDP 2002: 3)

Like the UN, the European Commission and many of its member countries also bind
together focus on democracy, governance, and human rights, highlighting both the
inherent importance of these topics and their relationship to development. The 2011
Agenda for Change on EU development policy, for instance, notes that good
governance, in its political, economic, social and environmental terms, is vital for
inclusive and sustainable development. EU support to governments should feature more
prominently in all partnerships, notably through incentives for results-oriented reform
and a focus on partners commitments to human rights, democracy and the rule of law
and to meeting their peoples demands and needs (European Commission 2010: 5). The
European Commission (n.d.) believes that democracy and human rights are universal
values that should be vigorously promoted across the world and intends to promote
them in all of its external policies. Similarly, programming by the European Instrument
for Democracy and Human Rights (EIDHR) is guided by five objectives: enhancing
respect for human rights in countries where they are most at risk, strengthening the role
of civil society, supporting actions in areas covered by EU Guidelines, supporting
relevant international and regional frameworks, and enhancing democratic electoral
processes, particularly through election observation.

Emphasis on the political components of governance has been especially strong in

governance work on Africa, where it was explicitly incorporated into the mandates of
several major organizations founded in the 2000s (see World Bank 1989; Abrahamsen

12
2000; NEPAD 2007). For instance, unlike its predecessor, the Organization of African
Unity, the African Union explicitly recognizes respect for democratic principles,
human rights, the rule of law and good governance among its founding principles
(African Union 2000). The New Partnership for Africas Development (NEPAD),
launched by the AU in 2001, identifies peace, security, democracy, good governance,
human rights and sound economic management as conditions for sustainable
development (NEPAD 2001: 18; see also NEPAD 2007). In 2003, NEPAD inaugurated
the African Peer Review Mechanism (APRM), an initiative to develop voluntary self-
assessments of governance by AU member states, with the objective of ensuring that
countries comply with the Declaration on Democracy, Political, Economic and
Corporate Governance (NEPAD 2007).

The interlinked issues of aid, democracy, and governance also remain sharply
controversial on the continent.6 In January 2007, for instance, the AU adopted the
African Charter on Democracy, Elections and Governance, which builds on the
constitutive act of the AU in order to promote adherence by all states to the universal
values and principles of democracy and respect for human rights, including the rule of
law, free and fair elections, judicial independence, political pluralism, gender equality,
citizen participation, freedom of the press, and public accountability (African Union
2007, Article 2; Saungweme 2007; Kane 2008; Matlosa 2008). The Charter is to enter
into force after ratification by fifteen countries. As of mid-2011, however, it was ratified
by only ten countries: Burkina Faso, Ethiopia, Ghana, Guinea, Lesotho, Mauritania,
Rwanda, South Africa, Sierra Leone, and Zambia (AU 2011).7

In this context, one central underlying critique of the good governance agenda is well
summarized by Issa Shivji: Governance, he argues, is constructed primarily on the
terrain of power, and the good governance discourse does not admit the
relationships of power. Rather it presents itself as a moral paradigm, distinguishing
between the good, the bad and the evil. Good governance as political conditionality has
thus become a flexible tool in the hands of global hegemonies to undermine the
sovereignty of African nations and the struggle for democracy of the African people
and the people are no longer the agency of change but rather the victims of bad
governance to be delivered or redeemed by the erstwhile donor-community (Shivji
2003).

4 Good governance as a concept

Given the stated importance of good governance and the amount of work that has been
done on the topic, the looseness of the working definitions described above is notable.
For instance, the World Banks 2007 report, Strengthening the World Bank Group
Engagement on Governance and Anticorruption, which outlines its strategy on
governance, provides no explicit definition beyond a brief quote from former Bank
president Paul Wolfowitz. Likewise, the African Development Banks Governance
Strategic Directions and Action Plan GAP 2008-2012 defines good governance in a

6 For instance, see the papers presented at the 2011 conference on Two Decades of Democracy and
Governance in Africa: Lessons Learned, Challenges, and Prospects, organized by the UNECA, the
Council for the Development of Social Science Research in Africa (CODESRIA), and Johns Hopkins
University.
7 It has been signed by 38 (of 53) African countries.

13
short footnote, while the European Commissions European Governance: A White
Paper provides a similar treatment.

Definitional brevity is not in itself problematic, but it is so in this case because of the
clearly contested nature of good governance and the complexity of its components.
None of the donor organizations discussed above fully address, for instance, why one
particular component of governance rather than another is included in its own
definition. Why does the ADB define good governance as accountability, participation,
predictability, and transparency, while the European Commission defines it as openness,
participation, accountability, effectiveness, and coherence, and the OECD
accountability, transparency, efficiency and effectiveness, responsiveness, forward
vision, and rule of law? Further, how exactly are these various terms defined? Should
human rights be understood to refer to both civil and political rights and economic,
social, and cultural rights as specified in the International Bill of Human Rights, or
primarily to civil and political rights, as emphasized in most discussions? Does
accountability mean the same thing to the ADB as to the EC, OECD, World Bank,
AfDB, and UN? Does rule of law refer to thin or thick variants? Is a country
considered a democracy if it meets minimal Schumpeterian standards, or is democracy
understood in its broader sense? If the latter, what are the major differences between
liberal democracy and good governance?

In short, on the basis of working definitions, there is easily disagreement among donors
in terms of which countries should be classified as well-governed and which as poorly
governed. And, there is no clear basis upon which to argue the merits of one
classification versus another or to evaluate the relative importance of various
governance components. Rwanda suggests some of the dilemmas involved: on the one
hand, many observers note Rwandas progress in economic and management reforms
since the genocide in 1994. Drawing on the WGI, Kaufmann, et al. (2009), for instance,
highlights major improvements in governance in Rwanda between 1998 and 2008,
focusing on measures for government effectiveness and the rule of law. On the other
hand, many other observers focus on the problematic nature of Rwandas recent record
with respect to democracy and respect for civil and political rights (see McDoom 2011;
Human Rights Watch 2011). Along those lines, Human Rights Watch, for instance,
sharply criticized UK Department for International Development (DFID)s policy in
Rwanda, where it was the largest bilateral donor, noting that despite DFIDs stated
commitment to good governance:

DFIDs programmes do not appear to have made any appreciable impact

on the observance of human rights or the responsiveness and transparency
of governance in Rwanda. DFIDs aid to Rwanda has increased year by
year, without any corresponding improvement in these areas. Indeed, with
respect to freedom of expression and political space, the situation may even
have worsened in the last ten years. (Human Rights Watch 2011: 6; see
also Tertsakian 2011)

Whether Rwanda should be considered well-governed because of its economic

advances, or poorly governed because of its democratic deficits, has clear implications
for development assistance in the region.

14
In other words, in social science terms, good governance is a poorly specified concept.
While this point may seem purely academic, it is in fact central to development policy
because concepts are tools for fact-gathering and elements of a theoretical system
(Sartori 1970: 1052). Development practitioners need good concepts in order to
undertake three major projects: measuring and assessing the quality of governance
within and across countries; understanding the factors that influence the quality of
governance in order to design evidence-based policy that promotes better governance;
and analyzing the relationship between good governance and various outcomes, such as
economic growth. Unless development practitioners can first identify what they are
trying to measure, they cannot argue convincingly that they have measured it. As
Adcock and Collier (2001: 532) show, systematized concepts are the point of departure
for assessing measurement validity. Unless they develop valid measurements, they
cannot know that the empirical relationships they observe between variables are
meaningful or that they give any insight into hypothesized relationships. Unless they
can specify and rigorously test hypotheses on these relationships, they cannot argue on
the basis of empirical evidence that particular projects, programmes, or policies lead to
improvements in governance, much less that they lead through improvements in
governance to economic development and other outcomes.

Others scholars have commented on related points. Focusing on EU policy, for instance,
Landman and Larizza (2010: 3) argue that:

Despite the consistency in the overarching goals of EU policy regarding

democracy, good governance, and human rights, there remains a degree
of conceptual confusion and an omission of terms that make policy
documents opaque, particularly on how aid modalities and cooperation
will lead to the desired outcomes. More attention needs to be focused on
how the EU defines democracy, good governance, and human rights,
which in turn can lead to precise ways in which these concepts can be
measured and monitored.8

Highlighting the weaknesses of the governance concept as an element of a theoretical

system, Andrews (2008: 397-98) laments that:

The discussion I provide on the theoretical framework of the

[governance] indicators is limited because of the limited references to
theory in the good governance literature. Where theoretical references
are made in the good governance literature they are not consistent,
referencing modernist Weberian models at some junctures, post-modern
new public management at others. The only consistent citation is to
[Douglass] Norths new institutionalism and the argument that
institutions matter and that different institutional structures in
governments will yield different results. This is simply not enough to
call a theory of effective government, especially from an organizational
perspective.

From an alternate but related angle, Shivji (2003) makes a case for understanding good
governance not as part of a theory of institutions, but from a Marxist standpoint as a tool

8 On the World Banks Worldwide Governance Indicators, see also Kurtz and Schrank (2007b: 564).

15
of hegemonic power deployed as a moral paradigm by the dominant donor-community
discourse. He concludes that African intellectuals must join issue with neo-liberalists
and expose the paucity of concepts like good governance.

Gerring (1999)s eight criteria of conceptual goodness provide a useful framework

within which to consider the key weaknesses of good governance as a concept. Four of
these criteria are especially relevant here: First, good governance lacks parsimony. In
Gerrings (1999: 371) words: Good concepts do not have endless definitions. It should
be possible to say what it is one is talking about without listing a half-dozen attributes.
As Table 1 illustrates, there are so many working definitions of good governance, each
with multiple and different attributes, that to what exactly the term should refer is never
immediately clear. This is well illustrated, for instance, in an exchange on governance
and growth in the Journal of Politics between Kurtz and Schrank (2007a, b) and
Kaufmann et al. (2007a, b). Kurtz and Schrank (2007a) define good governance as the
quality of public administration and proceed to use the Kaufmann et al.s Worldwide
Governance Indicators (WGI)s measure of government effectiveness in their
reanalysis of the relationship between governance and growth. Kaufmann et al. (2007a)
in turn reject Kurtz and Schrank (2007a)s analysis arguing, among other points, that
they have defined good governance too narrowly. While it is easy to get into endless
terminological tussles over what governance is, they note, leading papers in this
literature tend to focus on a more basic notion of governance going back to the seminal
work of Douglas North: the norms of limited government that protect private property
from predation by the state. This concept is much more closely related to our measures
of the Rule of Law and Control of Corruption (555 sic). Kurtz and Schrank (2007b) in
turn defend their focus on government effectiveness, while Kaufmann et al. (2007b)
maintain that Kurtz and Schranks exclusive emphasis on this one particular dimension
of governance to be idiosyncratic and not shared by the large economics literature on
institutions and growth (570). In the end, whether one accepts Kaufmann et al.s
position, their defense itself adds to conceptual confusion because their WGI measure in
fact includes six components in all, only three of which have much to do with the basic
notion of governance that they defend in Kaufmann et al. (2007a, b).

Such definitional debates affect a variety of work on governance. To give just one other
example, Holmberg et al. (2009) discuss the same problem with findings on the
relationship between the quality of governance and income inequality (136). Indeed,
they caution, the lack of a standard definition can be even more problematic than
terminological confusion, for it poses a risk that researchers will employ definitions
that best support their theory (137).

Second, good governance lacks differentiation: it is not distinguished from other

related concepts. The most problematic of these is liberal democracy, i.e., a system of
democratic rule with political liberties. As Bollen (1993: 1208-1209) summarizes,
political liberties exist to the extent that the people of a country have the freedom to
express a variety of political opinions in any media and the freedom to form or to
participate in any political group, while democratic rule (or political rights) exists to
the extent that the national government is accountable to the general population, and
each individual is entitled to participate in the government directly or through
representatives. Liberal democracy is sometimes distinguished from other forms of
elected governance such as illiberal democracy, which has contested elections, but lacks
civil liberties, and related concepts of electoral democracy, delegative democracy,

16
authoritarian democracy, and pseudodemocracy (see ODonnell 1994; Zakaria 1997;
Collier and Levitsky 1997; Diamond 2002). The differences between liberal
democracy and good governance in the more political approaches to governance
described above are not clear: both imply democracy and representation, respect for
human rights, the rule of law, accountability in government, and particular institutions,
such as free and fair elections, legislative bodies, and well-functioning parties and
interest groups. A good shorthand way of describing good governance as defined by
the UN, European Commission, and many bilateral donors seems to be liberal
democracy plus development, even though some donors shy away from the liberal
label and the cultural imperialism with which it is sometimes associated.

Good governance as defined by the multilateral development banks, on the other hand,
has a number of similarities to the concept of the developmental state, i.e., a state that
possesses the vision, leadership and capacity to bring about a positive [economic]
transformation of society within a condensed period of time (Fritz and Rocha Menocal
2007: 533; see also Gerschenkron 1962; Haggard 1990; World Bank 1993; Evans
1995). In fact, although not explicitly discussed by the multilateral banks, the core
difference between the developmental state, and their concept of good governance
appears to be the formers emphasis on state involvement and capacity. Gerschenkron
(1962), for instance, highlights the central role of state involvement in industrial
financing, while Haggard (1990) makes a case for how governments in East Asia were
able to create rapid growth by skillfully pursuing mixed strategies of import substitution
and export-led industrialization. The good governance agenda as pursued by the World
Bank, on the other hand, advocates market-led and neo-liberal policies, in which the
state plays a minimal role (see Hout 2007). Fully engaging with the literature suggests a
potentially even more fundamental problem: if theorists of the developmental state are
right, the concept of good governance as defined by the Bank is inherently conflicted
because good governance is inextricable from development, but neo-liberal economic
institutions may not be what is necessary to generate development.

This last issue points to a third weakness of good governance as a concept: it lacks
coherence. The characteristics that actually characterize the phenomena in question [do
not] belong to one another (Gerring 1999: 373). As Grindle (2004) points out, there
is nothing much inherently wrong with most of the items that comprise the laundry list
of the good governance agenda. Indeed, who would argue for the value of predatory
states led by dictators who abuse human rights and treat state funds as their own? Yet,
as discussed in more depth below, empirical evidence and theory both raise questions
about the claim by proponents of the good governance agenda that all of the items on
the list go logically together and all promote development. As the previous discussion
suggests, several of the components identified in Tables 2 and 3 relate most clearly to
liberal democracy, while several others have overlaps with the developmental state.
Others are not necessarily captured by either concept. Additional issues highlighted by
some definitions of governance (social welfare, sustainability, public service provision)
add to the ad hoc nature of the concept.

A final problem with the concept of good governance is its lack of theoretical utility: it
confuses, rather than aids, in the formulation of theory and the related project of testing
hypotheses (see Gerring 1999: 381). The exchange between Kurtz and Schrank, and
Kaufmann et al., discussed above underscores this basic point: much of this debate
hinged not upon testing of the causal linkage between the quality of governance and

17
growth, but upon failure to agree on common definitions and measures of good
governance.

More generally, the way in which the good governance concept confuses theory-
building is evident in policy discussions about the relationship between governance and
growth. This relationship is generally accepted as fact: as NEPAD (2007: 4), for
instance, notes, The evidence from cross-country analysis is clear. Upon closer
reading, however, many of the most frequently cited studies referenced as clear
evidence of governances impact on growth deal with particular components of good
governance, rather than other components or the concept as a whole: Knack and Keefer
(1995), for instance, addresses the impact of property rights. Acemoglu et al. (2001)
focus on extractive state institutions, and the main variable employed in their analysis is
an index of protection against expropriation (the same data employed by Knack and
Keefer 1995) (1376, 1377). Mauro (1995) and Gupta, Davoodi, and Alonso-Terme
(1998), among others, focus on corruption. In short, although the record is mixed, the
literature suggests much clearer evidence that secure property rights and low levels of
corruption support economic development, than that democratic political institutions or
good governance in general does (see Resnick and Birner 2006: 20-26; Holmberg et al.
2009: 138-44).9

Arguably even more troubling for theory development is the sometime use of good
governance to refer to what helps governmentsachieve economic progress
(Wolfowitz, as cited in World Bank 2007c: 1), i.e., whatever black box of institutions,
norms, and practices promotes economic growth and development. This
conceptualization assumes that good governance leads to development by definition, so
theorizing and theory testing on the relationship is apparently nonsensical: the
proposition that certain political and economic institutions contribute to economic
development is a hypothesis, yet this hypothesis cannot be rejected with this
conceptualization because if a measure of good governance is not empirically related to
development, it must not be a good measure.

5 Good governance and development: correlations, disaggregation, hypotheses

It is difficult to ignore the fact that many countries near the bottom of rankings such as
the UNDPs human development indexthe DRC, Burundi, Chad, the Central African
Republicare places with much weaker state institutions than those near the top of
such listsNorway, Australia, the US, Germany, Sweden (see UNDP 2011). Kaufmann
and Kraay (2002: 169-72) show that there is also quantitative evidence that a positive
correlation exists between measures of the quality of governance broadly defined and
various measures of economic development, such as per capita income.10 This
correlational finding is debatedKhan (2009: 8, 2004, 2008), for instance, finds no
significant differences in the scores on good governance of high-growth and low-growth
developing countriesand thus requires further study. But, it appears to be robust
enough that it is worth considering some of the causal processes that might be behind it.

9 However, evidence is clearly mixed. On the relationship between democracy and respect for civil
liberties, and development, see, e.g., Li et al. 1998; Kaufmann et al. 1999: 15; Halperin et al. 2004;
Holmberg et al. 2009: 138-39.
10 The conceptualization and measurement of development is another important and related debate (see
Myrdal 1974; Soubbotina 2000; Sumner and Tribe 2008).

18
Figure 1 presents six of the simplest causal possibilities: the first three are the most
obvious: first, as donor agencies tend to highlight, good governance may promote or
cause development (path A). Second, development may cause good governance (B).
Third, another factor may cause both (C). Thinking in the disaggregated terms sketched
above, it is also possible that some component of good governance may cause
development (D); development may cause some component of good governance (E); or
a third factor may cause both (F). To complicate the story still further, it could also be
that some component(s) of good governance causes development (or some
component(s) of development), while others contribute to economic stagnation, but that
the effect of those that cause development is stronger. Alternatively, it could be that the
interaction of several components of good governance causes development. Or, these
paths could operate sequentially, such that B leads to A or C leads to E, and so
on.

Figure 1: Six simple causal possibilities

Good Governance

D
Develop
Growth
A ment
B

Source: Authors own illustration.

Existing work on governance by development institutions has been framed largely in

terms of path A, but even a cursory peak into broader related literatures underscores
the plausibility of the other causal possibilities sketched above. If we think in terms of
classical Weberian frameworks, for instance, our obvious working hypothesis is that
development leads not to good governance broadly defined, but to the emergence of
modern, efficient bureaucracies based on formal and universally-applied rules (the
rule of law), and that these institutions in turn facilitate further economic growth, i.e.,
path E, followed by path D. Because the literature on good governance does not
disaggregate concepts in this way, however, this hypothesis has not been fully explored
in existing work. One study that addresses it indirectly is Kaufmann and Kraay (2002:
188-204), which explicitly sets out to explore the related hypothesis that there is a
sequential relationship at the aggregate governance level, from B to A, but in fact
tests this hypothesis (E to D) by using data on the rule of law from the WGI to

19
measure governance.11 Interestingly, Kaufmann and Kraay (2002) show, contrary to
what the simple Weberian hypothesis predicts, that there is a negative feedback from
per capita income to rule of law, a finding that should be further explored.12

The scholarly literature on democracy and development also raises questions about the
assumption in the good governance literature that all good things go together.
Empirical studies, for one, suggest that democracy has no long-term impact on
economic performance (Gerring et al. 2011: 1735; Berman 2007: 28).13 Major work
also spotlights several hypotheses most consistent with paths E and F. Indeed, it
would be fair to say that from the standpoint of this literature, the important claim by
the UN and other donors that democratic governance causes development (path D) is
highly debatable, if not obviously incorrect.

One of the central debates in the subfield of comparative politics for the last half
century rather has been over the extent to which development causes democracy (path
E). In a classic 1959 article, Lipset found that the more well-to-do a nation, the
greater the chances that it will sustain democracy (75). Building on the work of Marx,
Toqueville, and Weber, as well as other modernization theorists, Lipset highlighted a
number of underlying mechanisms, including the emergence of a participant society
(Lerner 1958); the growth of the middle-class and the increasing dominance of
moderate middle-class values; the emergence of cross pressures that make the lower
classes less receptive to extremist ideologies; and the presence of intermediary
organizations that promote participation in the mass society (see Lipset 1959: 82-85).

One of the major critiques of this argument and modernization theory more generally
was Huntingtons classic 1968 book, Political Order in Changing Societies, which
argued that development certainly leads to profound social changes, but that these
changes are often associated with instability and violence, rather than the emergence of
stable, democratic systems. Stable democratic systems are most likely to emerge,
Huntington argued, only when the development of political institutions that can channel
and respond to increasing demands for political participation is compatible with the rate
of social mobilization. In other words, path E operates only under specific conditions.
In a more recent line of critique, Przeworski et al. (2000) offer another spin on path E:
that it is not that development leads to democratic transition, but that countries at higher
levels of development are less likely to experience democratic reversals once they adopt
democratic institutions for other reasons. Least we think that the literature has

11 This indicator is designed to capture perceptions of the extent to which agents have confidence in and
abide by the rules of society, and in particular the quality of contract enforcement, property rights, the
police, and the courts, as well as the likelihood of crime and violence (see
http://info.worldbank.org/governance/wgi/pdf/rl.pdf, last accessed 23 January 2012). Kaufmann and
Kraay (2002: 192) argue that because this indicator is highly correlated with both corruption and
government effectiveness, we can view this one dimension of governance as representative of
broader areas on which the quality of governance appears relatively poor in Latin America and the
Caribbean.
12 Their interpretation of this result is that improvements in governance will not occur automatically as
the development process unfolds and interventions to improve governance are warranted (204,
emphasis added).
13 Over the shorter term, other studies show that democracies and autocracies perform equally well, on
average, though democracies are less volatile (Doucouliago and Ulubasoglu 2006; Mulligan et al.
2004) (Gerring et al. 2011: 1735).

20
completely abandoned the Lipset hypothesis, other recent work shows support for it
(Doorenspleet 2004).

Other major theories of democracy and development underscore the plausibility of path
F. The role of culture, and specifically of Protestantism, has been highlighted, for
instance, both in the development of capitalism (Weber 2003) and of democracy (see
Lipset 1959: 85). Cross-national empirical analyses point to the role of social cleavages,
particularly ethnic divisions, in affecting both democracy and development (Przeworski
et al. 2000). Relatedly, Acemoglu et al. (2001) suggest a sequential version of path F:
geographic factors affecting potential settler mortality policies influenced first the
development of early colonial institutions, and in turn the development of current
political institutions and economic performance.

6 Conclusion

Almost all major development institutions today say that promoting good governance is
an important part of their agendas. Yet, as this review suggests, this is an extremely
elusive objective: good governance means different things not only to different
organizations, but also to different actors within these organizations. Working uses of
the term good governance by donor institutions tend to highlight seven key areas:
democracy and representation, human rights, the rule of law, efficient and effective
public management, transparency and accountability, developmentalist objectives, and a
variety of particular economic and political institutions. In other words, they reflect a
variety of generally good things that do not necessarily all go together in any
meaningful way. Thus, while donors purport to support governance reforms as a means
of promoting development and purport to condition aid on the quality of governance,
their fuzzy thinking on the concept of good governance affects their ability to do both.

As the literature summarized above suggests, with some key exceptions, development
practitioners and economists have dominated the contemporary debate over good
governance, which is unsurprising given the origins of the agenda in the work of donor
agencies (see also Andrews 2008: 397). As we examine the components of good
governance highlighted in these discussions, however, the obvious and extensive
overlaps between many of the issues studied by good governance practitioners and
political scientists figure in sharp relief. As Putnam (1993: 63) notes, Who governs?
and How well? are the two most basic questions of political science. Indeed, there
are long traditions of research on almost all of the core components of good governance
identified in this study and related topics: democracy, representation, human rights, the
rule of law, bureaucratic development, public management, accountability, the
developmental state, comparative political systems, and comparative financial systems,
as well as state-building, civil conflict, the nation state, participatory democracy,
constitutional engineering, electoral institutions, decentralization, modernization, and so
on.14

In order to examine the disaggregated components of good governance fully,

development practitioners and economists should engage much more directly with some

14 Most of these topics are core research areas in comparative politics are thus reviewed in standard
overviews of the sub-field (Boix and Stokes 2007; Landman and Robinson 2009) and graduate survey
courses (Domnguez and Remington 2008).

21
of this work. As shown above, even a cursory look into it highlights major questions
about some of the assumptions that have been made by donors about good governance
and its relationship to development. To put it very bluntly, from the perspective of
political science, many of policy claims made by donor agencies on good governance
are puzzling indeed: they seem to blithely contradict well-established theories and
empirical findings with seeming ignorance of long research traditions.

At the same time, political scientists are also guilty of insufficient efforts to provide
clear answers to important real world questions.15 As Levi noted in her 2006
presidential address to the American Political Science Association, a major problem
confronting the contemporary world is how to build effective governments where they
do not exist and, despite the importance of questions of governance to the field of
political science, we still lack the recipes that transform these elements into a
government that fulfills its population, all of its population, while also reproducing itself
regularly and without destructive trauma (5, 13).

The question of how to improve governance? is of course the most pressing from a
policy perspective. This study has argued that it cannot be rigorously answered without
first better addressing the concept of good governance: how to improve what exactly?
The most promising way forward in answering the question of how to? is to formulate
and test precise hypotheses about the causal processes behind the various components of
good governance identified above. This is a project both for students of politics and of
development.

15 However, note some key exceptions that propose theories and measures of governance (e.g., Hyden
and Bratton 1992; Hyden et al. 2004; Rotberg 2004; Rothstein and Teorell 2008; Holmberg et al.
2009; Joseph 1990; Rotberg and Gisselquist 2009) and critiques of the literature (e.g. Grindle 2004,
2010; Kurtz and Schrank 2007a, 2007b; Andrews 2008).

22
Table 2: Components of good governance in definitions from selected multilaterals16

Democracy, Human Rule of Efficient and Transparency Particular Objective = Other Issues
Representation Rights Law Effective and Institutions Development
Public Accountability
Management
United Nations
UN (in considered good and promotes promotes operates in a operates in a free, fair and promotes equity
general) democratic to the degree fundamental the rule of manner that is manner that is frequent and security
in which a countrys freedoms law effective, free of corruption elections,
institutions and processes efficient and and accountable representative
are transparent; promotes enduring to the people, legislatures
participation and promotes and an
pluralism accountability independent
and judiciary to
transparency interpret those
laws
UNDP Good, or democratic governing governing governing
governance entails systems which systems which systems which
meaningful and inclusive are capable are are responsive,
political participation transparent inclusive

Multilateral Development Banks

World Bank function[s] transparent and helps fundamental
effectively; accountable governments willingness to do
strong skills and institutions achieve the right thing;
competence economic deliver[s]
progress services to its
people
AfDB participation the combating accountability
promotion corruption and
of an transparency
enabling
legal and
judicial
framework
ADB participation effective accountability management of predictability
management and a countrys
transparency economic and
social resources

16 This includes all of those listed above, with the exception of the EBRD and IADB.

23
 for
development
Other Multilaterals
European participation; democracy the rule of effectiveness accountability openness
Commission law and coherence
IMF17 the the transparency reforms to
effectiveness of of government public sector
public resource accounts institutions
management stability and (e.g., treasury,
transparency of central bank)
the economic and
and regulatory administrative
environment for procedures
private sector (e.g.,
activity expenditure
control); price
systems,
exchange and
trade regimes,
and banking
systems and
their related
regulations
OECD responsiveness tak[ing] rule of law efficiency and accountability forward vision
into account the effectiveness and
expectations of civil society transparency
in identifying the general
public interest

Source: Compiled by author.

17 As given above, the IMF does not provide a general definition of good governance, but explicitly focuses on the aspects of good governance related to its own work.

24
Table 3: Components of governance and good governance based on definitions in OECD (2009)18

Democracy, Human Rights Rule of Law Efficient and Transparency and Particular Objective = Other Issues
representation Effective Accountability Institutions Development
Public
Management
Selected OECD Countries
Australia citizens and exercise their
groups state their legal rights
interests, exercise
their legal rights
and mediate their
differences
Austria upholds upholds human upholds the transparent and for the purposes equity,
democratic rights rule of law accountable of equitable and sustainability
principles management sustainable
development
Canada legitimacy
Denmark upholds upholds human upholds the transparent and for the purposes equity,
democratic rights rule of law accountable of equitable and sustainability
principles management sustainable
development
France
Germany/GTZ guided by the guided by guided by effective social
principles of human rights the principles of political welfare
democracy, such the rule of institutions
as equal political law
participation for
all
Ireland management of
a countrys
economic and
social resources
for development
Netherlands upholds upholds human upholds the transparent and for the purposes equity,
democratic rights rule of law accountable of equitable and sustainability
principles management sustainable
development
Sweden incorporating human rights incorporating an efficient and central
participation and the rule of predictable democratic

18 Rows in italics use the term governance only, while others use the term good governance.

25
 the rule of law, law public sector institutions like
i.e., with the a democratic
characteristics of constitution, a
democratic parliament,
governance; general
participation and elections
an active civil
society
Switzerland mechanisms, mechanisms,
resources and resources and
institutions institutions
through which through which
groups and groups and
individuals in individuals in
society articulate society
their interests, exercise their
find compromises legitimate rights
in a maze of and obligations
differing interests

United Kingdom mechanisms, mechanisms, affect public life
processes, processes, and economic
relationships and relationships and social
institutions and institutions development
through which through which
citizens and citizens and
groups articulate groups
their interests exercise their
rights and
obligations
United States open to citizen efficient, accountable public
USAID participation and effective management
that strengthens public process
a democratic management
system of process
government
Selected Multilaterals
Asian institutional functioning and rules and management of
Development environment in capability of the institutions that a countrys
Bank which citizens public sector create the economic and
interact among framework for social resources
themselves and the conduct of for development
with both public and

26
 government private
agencies/ business,
officials including
accountability
for economic
and financial
performance,
and regulatory
frameworks
relating to
companies,
corporations,
and
partnerships
European relevance of relevance of relevance of relevance of the States
Commission democratization human rights the rule of law sound public ability to
and democracy administration serve the
and civil society citizens; a
basic
measure of
the stability
and
performance
of a society
IMF with due regard management of
for the rule of government in a
law manner that is
essentially free
of abuse and
corruption
UNDP mechanisms and mechanisms rules,
processes for and processes institutions and
citizens and for citizens and practices that
groups to groups to set limits and
articulate their exercise their provide
interests, mediate legal rights and incentives for
their obligations individuals,
differences organizations
and firms
World Bank provision of
public goods
and services
Source: Compiled by author.

27
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